Thursday, February 24, 2005

Chase Begins for Chinese Gamers - Sina Deal Puts China in Play

"The firing gun that started the race was a below-the-radar purchase of a 19.5% stake in Sina (SINA), China's biggest Internet portal, by Shanda Interactive Entertainment (SNDA), China's leader in online games. ... Shanda is now in a position to play kingmaker at Sina," said Jason Brueschke, an analyst with Pacific Growth Equities, which performs no underwriting for companies. "They can now dictate, if not strongly influence, whether Sina is bought and who it would be sold to."

"The battle for Sina might end up coming down to two unlikely rivals: Yahoo! (YHOO), the American online media giant that analysts say has been quietly courting Sina for a takeover for some time, and Softbank, a Japanese venture capital firm that is Yahoo!'s co-investor in Yahoo! Japan. Softbank is a key backer in the SB Asia Infrastructure Fund, which controls a 15% stake in Shanda."

"But for both companies -- and for any non-Chinese company seeking a strong foothold in China's Internet sector -- there are few options beyond Sina, which is only 15% owned by Stone Electronic and directors. According to Goldman Sachs analyst James Mitchell, the other major Internet companies in China -- such as Shanda, NetEase (NTES) and Tencent -- are majority-owned by founders and directors. The closest is Sohu.com (SOHU), which is 40% owned by controlling shareholders." Read more